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WORKPLACE, FOR NOW AND FUTURE today’s workspace is built with a greater emphasis on collaboration and efficiency 2/3 of the office inventory in D.C. metro are 20 years or older

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WORKPLACE, FOR NOW AND FUTURE workspace design is used strategically for talent acquisition and corporate branding productivity sustainability mobility wellness efficiency

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WHAT’S NEXT? is D.C. making a comeback in 2015? WHAT’S NEXT? is D.C. making a comeback in 2015?

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FEDERAL LEASE EXPIRATIONS the federal government is likely to shed two to three msf over the next three years more than one third of all federal leases in the NCR is expiring in the next three years

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WHAT WILL DEMAND LOOK LIKE? Moody’s is projecting a spike in office-using employment growth – will it hold true? tenants continue to downsize and consolidate

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MOVEMENTS TO KEEP AN EYE ON Densification and consolidation efforts will persist as tenants continue to seek efficiency. On the other hand, more firms may be poised for expansion and reinvest in growing their business. However, growth in the private sector will likely be offset by the shrinking federal footprint. Activity will concentrate in high-density urban cores that are walkable, transit-accessible, and amenity-rich. Trophy/Class A products will see higher demand. Commodity space is likely to continue to compete on pricing and concession offering. Spec development will remain limited until market fundamentals strengthen. Landlords will invest more in building upgrades and repositioning.

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Is going to happen in 2015: 14,186 units with a start date in 2015. The majority are in the planning stages. (Axiometrics Pipeline Property List 1.26.2015) Washington, DC ranks fourth in New Construction Markets by Volume according to Pierce Eislen’s 2015 Multifamily Rent Forecast International Investors are targeting gateway cities such as those in the Boston-Washington corridor. (ULI Emerging Trends in Real Estate) 32 Multifamily: Washington D.C. MSA WHAT THEY SAY….

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Is going to happen in 2015: Washington, DC is in the Top 20 Markets for job growth (ULI Emerging Trends in Real Estate) Employment growth has primarily been in the service industries creating a gap between low and high income earners. (Multifamily Housing News quote Jake Kern, Pierce Eislen12.24.2014) Washington, D.C. and Northern Virginia are not expected to experience rent growth (Jack Kern, Pierce Eislen, Multifamily Housing News 12.24.2014) 33 Multifamily: Washington D.C. MSA WHAT THEY SAY….

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Is going to happen in 2015 (based on our experience): DC, Alexandria, Vienna, Fairfax, Laurel: under construction with stiff competition in each submarket New product crisscrosses submarkets: Example: Alexandria prospect considers Old Town and Landmark Touring and informing international investors of multifamily investment opportunities around the country including Washington, DC. Note: Very interested in political relationships and real estate development. 34 Multifamily: Washington D.C. MSA WHAT WE SAY….

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Is going to happen in 2015 (based on our experience): Demographics: Income in DC 47% earn $36K to 76K; 22% earn $77K to $106K; 28% earn over $107K Demographics: Age in DC 83% under 35; 12% are 36 to 45; 5% are over 46 Asking rents range from $2.65 to $2.94 psf Effective rents range from $2.49 to $2.76 psf Concessions offered primarily up front with some fees waived. 35 Multifamily: Washington D.C. MSA WHAT WE SAY….

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Is going to happen in 2015 (based on our experience): Prospects relocating to Metro DC for employment, in including contracted positions. However, many prospects need roommates to afford new apartment. 2015 Budgets anticipate flat rent growth. 36 Multifamily: Washington D.C. MSA WHAT WE SAY….

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The Welfare State(s) 40 States are still trying to manage their budget deficits: Maryland’s new governor issued his first proposed budget last week with attempts to close a projected $1 billion deficit for his first two years of office. Virginia is projecting a $2 billion deficit this year. How will these deficits be closed, what cost cuts and/or tax increases will we be dealing with when the legislatures are finished with the year?

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The Good, The Bad and The Government 41 FY 2015 IRS budget cuts: The cut will be about $346M, resulting in a hiring freeze. The hiring freeze will result in the loss of 1,800 enforcement personnel through attrition. The lost personnel will cost the government $2B in revenue that would have otherwise been collected. There will be 46,000 fewer audits. In addition to fewer audits, which taxpayers may applaud, there will also be fewer IRS people available to provide answers to taxpayers’ questions. Source: Taxbooks